Historians, Policymakers, and Hybrid Failures: A Menage à Trois in the Making?

Before we can expect better laws and regulations to come out of Washington, state capitals, or municipal governments, policymakers need access to good histories of some seriously understudied topics.  Historians are not quite Rodney Dangerfield.  We occasionally get some respect from the powers that be in the media and in policymaking circles.  Some of us, however, lament that Clio doesn’t get as much respect (or its close concomitant, cash) as she deserves.  Others retort, with some justification, that money and influence can corrupt historical scholarship with presentist thinking or, perhaps worse, counterfactualism.  I submit that historians can increase our policy cachet, and perhaps our cash as well, without doing violence to our beloved muse.

The approach is one that I stumbled upon when writing Fubarnomics, a historically grounded policy analysis of some of the U.S. economy’s most dysfunctional aspects:  bailouts, construction, healthcare, higher education, investment banking, labor relations, mortgage markets, and retirement savings.  As I reviewed the secondary literature, I discovered that most scholarship on those controversial topics is either devoid of significant historical context or slanted toward conservative (anti-government) or liberal (anti-market) ideologies.  In other words, some scholars blame economic problems on market failures like asymmetric information, externalities, market power, and public goods, while others stress government failures like regulatory capture, forbearance, or incompetence.  As I tried to understand the historical context of some of our most pressing economic problems, I discovered that they were never due primarily to government or market failures.  Rather, they were always caused by the complex interaction of market and government failures over significant periods of time, a phenomenon that I coined “hybrid failure.”

Conceptualizing major economic problems as hybrid failures is important if policymakers are to have a reasonable chance of implementing effective (i.e., problem-reducing) reforms.  The older, more traditional models don’t have very good track records because their skewed views of causation lead to erroneous reform prescriptions.  The view that universities had budget problems because they were not business-like enough, for example, led to the implementation of largely disastrous “student-as-customer” models and the proliferation of for-profit, joint-stock colleges of sometimes dubious merit.  Similarly, the strongly held belief that labor unions were responsible for the stagnation of construction industry productivity led to some vicious union bashing in the 1980s and 1990s.  The movement reduced the importance of unions in the industry but did nothing to help improve outcomes.  Most custom construction projects still end up over-budget, overdue, or under-quality, and sometimes, as Bostonians recently learned, all three.  Hybrid failure analysis reveals that colleges would function better as professional partnerships owned by professors and that the construction industry would be vastly improved by project performance information disclosure and a best bid (as opposed to lowest bid) mandate.

Attempts to reform retirement savings and healthcare in the first decade of the third millennium also exposed the weaknesses of the market or government failure paradigm.  Debates over Social Security reform went little beyond “government good, market bad” from the Left and “government bad, market good” from the Right.  Both sides were only half right—governments are good and bad, as are markets—so little headway was made on reform before more urgent issues distracted both policymakers and the public.  Two significant healthcare reforms were implemented in the last ten years, Medicare Part D under Bush and the Patient Protection and Affordable Care Act under Obama, but neither will stop the upward cost spiral at the heart of the healthcare crisis because neither addresses its complex core causes.

In both instances—Social Security and healthcare reform—the range of alternative policies under consideration was extremely limited because hardly anyone knew how people saved for retirement or paid for their healthcare before the Great Depression and World War II.  Many very sensible institutions, traditions, and policies fell into disuse due to the tremendous economic stresses created by those unprecedented events.  Unfortunately, most were scrapped instead of being revived when more stable economic conditions returned after the war.  To this day, we’re paying a dear price for decisions made under duress during the Depression and World War II.

Any researcher whose head is not filled with partisan rage can identify hybrid failures.  It’s not rocket science.  Historians should prove particularly adept at spotting and explicating hybrid failures and how they evolved over time because, well, tracking complexity over time is what we do.  We are also comparatively good at presenting them to a non-specialist audience, like legislators and their staffs, because we tend to communicate well in writing by eschewing jargon, narrating stories, and tolerating complexity and nuance.

The biggest obstacle to the development of a loving relationship between policymakers and historians is more temperamental than technical.  For some decades now, most historians have focused intensively on matters of culture and the meanings of words.  Historians of construction, engineering, insurance, investment, mortgages, and other crucial aspects of modern society are therefore few and literally far between, scattered across a potpourri of departments (e.g., economics, government, sociology) and professional schools (e.g., business, education, engineering, law, medical, policy).  Top history journals remain inhospitable places for the purveyors of many technical subfields. Specialists are rallying spontaneously:  historians of public policy now have a journal and biennial meetings and insurance historians have held three ad hoc meetings in Europe since 2008.  Without greater support from the mainstream history establishment, however, their efforts may prove too few and too feeble to get policymakers to begin asking, as a matter of course:  which historians can best help us to understand this crisis or that chronic problem?  Policymakers may continue to jilt historians anyway but Clio should make a concerted attempt to seduce them, for everyone’s sake.